THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY
Required Report - public distribution
Date: 9/13/2018 GAIN Report Number: DR1814
Dominican Republic
Food Service - Hotel Restaurant Institutional
Opportunities for U.S. Products in DR’s Growing HRI Sector
Approved By: Lisa Ahramjian, Agricultural Attaché
Prepared By: Mayra Carvajal, Agricultural Marketing Specialist
Report Highlights:
The Dominican Republic is one of the most dynamic economies in the Caribbean region. With U.S. consumer-oriented product exports reaching $494 million in 2017, the country represents the fifth- largest market for such products in Latin America. Driven by a dynamic tourism industry, an increasing gastronomy focus, and solid domestic consumer demand, excellent opportunities exist for U.S. exports to the Dominican Republic’s food service sector. Leading U.S. products for distribution in hotels and restaurants include premium red meat cuts, pork, poultry parts, seafood, cheeses, frozen potatoes and vegetables, fresh fruit, wine, and craft beer. A strong preference for U.S. products exists in the sector, which incentivizes a wide range of promotions under the Sabor USA and other U.S. (state or regional) branding.
Market Fact Sheet: Dominican Republic
Executive Summary Quick Facts CY 2018
The Dominican Republic (DR) is an upper List of Top 10 Growth Products middle-income country with low and stable inflation. It is the second-largest economy in the 1) Cheese 6) Meat (Beef) Caribbean, just behind Cuba, and the third-largest 2) Wine 7) Seafood country in terms of population (behind Cuba and 3) Craft Beer 8) Baking Ingredients Haiti). In 2017, DR’s GDP reached approximately 4) Pork 9) Frozen potatoes/veg 5) Chicken Parts 10) Fresh fruit US$72.6 million, a 1.29 percent increase from 2016. The DR’s major export growth has shifted Consumer-Oriented Trade (U.S. billion) 2017 away from its traditional products (raw sugar and tobacco, green coffee, and cacao) to gold, Ferro- DR Imports (all sources) 1.14 nickel, sugar derivatives, free-trade zone DR Imports (from U.S.) 0.49 products, vegetables, and other agricultural DR Exports (all dest.) 0.64 products. Major imports include consumer- DR Exports (to U.S.) 0.23 oriented products and livestock feed, with the United States as a primary partner. Top 10 DR Retailers
Imports of Consumer-Oriented Products 1) La Sirena 6) Mercatodo 2) Pola Supermarkets 7) Plaza Lama Market Share (%) by Country: 3) Jumbo 8) Pricesmart 4) Nacional Supermarkets 9) Carrefour 5) Bravo 10) Superfresh
GDP/Population
Population: 10.6 million GDP: 71.2 billion USD GDP per capita: 6.72 USD
Sources: GTIS; ONE DR (2016); World Bank, DR Central Bank
Strengths/Weaknesses/Opportunities/Challenges
Strengths Weaknesses Implementation of Higher cost of some CAFTA-DR, which has U.S. products lowered or eliminated compared to duties on nearly 80 percent competitors Food Processing Industry of products
The Dominican Republic’s food processing Proximity to the United Import sensitivity of industry is valued at $2.6 billion, with an States and strong demand several products additional $723 million for processed beverages for U.S. products and tobacco. The United States has a strong history of supplying meat, edible meat offal, and Opportunities Threats animal and vegetable fats for the Dominican meat processing industry; this is expected to continue. Additional trade Competition from There is potential for increased exports of U.S. liberalization through the other CAFTA-DR ingredients for the Dominican milling, dairy, and full implementation of signees and the confectionary industries, especially since CAFT-DR by 2025 DR’s other free CAFTA-DR will be fully implemented by 2025. trade agreement partners Food Retail Industry Growth potential for U.S. Limited cold chain The Dominican modern retail sector offers a wide consumer-oriented capacity variety of U.S. products, is dominated by locally products, livestock feed, owned companies, and is growing rapidly. and ingredients for the food However, despite the prominence and growth of processing industry local supermarket chains, they only account for 20-25 percent of retail sales. The majority of sales are still in the traditional channel, which Contact: OAA Santo Domingo includes neighborhood stores (colmados) and warehouses, which offers largely local products. [email protected] | +1 809-368-7654
Section I. Market Summary
In the Dominican Republic (DR), the hotel, restaurant, and institutional (HRI) sector experienced a cumulative growth of 6.7 percent in 2017, representing the sector with the largest contribution to the GDP. Tourism continues to be very important to the DR’s economy and a key driver of trends and demand in the food service sector. According to the World Travel & Tourism Council, the DR’s travel and tourism contributed 5.4 percent to the DR’s total GDP in 2017 and is forecast to increase 4.4 percent in 2018. The average tourist spends approximately US$130 per day. A record of 6.2 million tourists arrived in the DR in 2017, despite the low visitation experienced after hurricanes Irma and Maria. Approximately 35 percent of tourists are from the United States and nearly 67 percent (3.4 million) of visitors arrive through the Punta Cana Airport, the most important tourism area of the DR. Most of the hotels located in Punta Cana, Puerto Plata, and La Romana operate under the “all inclusive” business model, serving nearly 3 million foreigners every year. Nearly 6.5 million tourists are expected to visit the DR by the end of 2018, which would be a new record.
In addition to demand from the tourist sector, the DR’s solid economic growth is increasing consumer purchasing power, which is fueling its growing gastronomy sector. Increased local demand fuels continuous growth, innovation, and creativity among leading independent and franchise restaurants. This growth in turn leads to continued expansion and interest in premium red meat cuts, pork, poultry parts, seafood, cheeses, frozen potatoes and vegetables, fresh fruit, wine, and craft beer.
ADVANTAGES AND CHALLENGES
Advantages Challenges 1. The implementation of CAFTA-DR, 1. Competition from other CAFTA-DR signees which has lowered or eliminated duties on and the DR’s other free trade agreement nearly 80 percent of products. partners.
2. A large and growing tourist population, 2. Delays for import permits and sanitary which demands high value food products. registration, which can affect the availability of imported ingredients.
3. A growing number of consumers 3. Requirement that U.S. products must comply demanding higher quality and healthier with Spanish language labeling products; they generally perceive that requirements. U.S. products meet their requirements.
4. Efficient food distribution channels (new 4. Cold chain limitations. highways, modernized seaports/airports).
5. Consumers greatly influenced by U.S. 5. 18 percent VAT and high internal logistic culture, with a positive perception of U.S. costs. products. Advantages Challenges 6. The proximity of the DR to the United 6. Lack of transparency and corruption, which States and strong bilateral relationships continue to earn the DR relatively low scores throughout the public and private sectors, in international comparison tables. (DR was which facilitates trade. 99th out of 190 countries in the World Bank’s 2018 “Ease of Doing Business” ranking.)
7. Growing population in urban centers and 7. A lack of institutional continuity across increased rate of employment. changes in government administrations.
8. A Dominican diaspora in the U.S. of approximately one million persons, clustered primarily in the northeastern states and Florida, whose remittance payments help support the Dominican economy.
Section II. Road Map for Market Entry
A. Key Factors for Market Access
The first step to importing new food products into the Dominican Republic is product registration. Importers register new food products with the Ministry of Public Health. The Ministry issues a certificate to the importer or the local legal representative with a Sanitation Registration Number, which must be printed on the label of the product or as an additional sticker.
For more information, please refer to Post’s 2017 Food and Agriculture Import Regulations and Standards (FAIRS) report, DR1714 (https://www.fas.usda.gov/data/dominican-republic-fairs- country-report-0) and the exporter guide (https://www.fas.usda.gov/data/dominican-republic- exporter-guide-2).
Note: In September 2017, the Ministry of Agriculture started to implement the Customs Authority’s electronic system, One Stop Shop of External Trade (or VUCE in Spanish) to digitize their agricultural imports authorizations process. The system is currently being used for a some commodities, including apples, grapes, citrus, vegetables, and meats. Once fully implemented, the system is expected to increase transparency for traders, who will be able to view the status of their approvals and reasons for any rejections.
B. Marketing Channels
In the DR, most food service importers prefer to purchase directly from U.S. manufacturers. However, for smaller volumes, and to capitalize on logistical and transportation advantages, many importers purchase consolidated shipments from distribution centers in Miami or other east coast locations. For meat, buyers also frequently purchase combined product shipments, including mixing meat and seafood products in the same container. Local providers, working as distributors, can also be found in the meat and seafood supply chains. They usually focus on a smaller number of end users (hotels and restaurants) and buy from the larger importers.
Typical Distribution Channel:
Fruit, especially apples and pears, have a simpler distribution channel, with a few major importers directly supplying outlets.
Fruit Distribution Channel:
Some of the best opportunities for U.S. products are with the large hotels (including U.S. franchises such as Hard Rock Café, JW Marriott, Hilton, and Holiday Inn) and the all-inclusive resorts in the eastern DR. However, these resorts are highly price-sensitive. Similarly, hundreds of restaurants include U.S. imported products in their menus, creating additional opportunities for U.S. agricultural products. Post has put together a list of these potential clients that can be provided upon request.
Local products predominantly supply the institutional portion of the HRI sector. Nevertheless, catering is a growing niche that may provide opportunities for U.S. products in the future. In addition, school food programs may provide opportunities for U.S. grains and other products not produced locally.
C. Market Composition
There are nearly 2,000 hotel, restaurant, or cafeteria establishments in the DR. Cafeterias and restaurants represent about 88 percent of this total, although they do not account for the same percentage of total business volume. Restaurants focus more on new foods and promotions, while hotels are more interested in sales volume. As a result, while only consisting of 12 percent in terms of the number of establishments, hotels have higher sales volumes than independent restaurants.
There are approximately 21 fast food restaurant chains, with an estimated 129 outlets in the DR. Most of them are U.S. franchises. There are also approximately 333 medium and large restaurants in the country, with 167 of them located in Santo Domingo (of which 50 are considered high-end restaurants), 61 in Santiago, 60 in Bávaro, 23 in La Romana, and 22 in Puerto Plata. The most important U.S. products for these outlets include: meat cuts, seafood, cheese, fruits, and frozen potatoes. In addition, some of the key retail establishments distribute wines and other products to these restaurants. Section III. Competition
The United States has the largest market share in consumer-oriented products (43 percent in 2017). The European Union is our largest competitor, with a 24 percent market share in this category. Major product categories are described further below:
Beef: The United States exported US$53 million of beef and beef products to the DR, representing a 99 percent market share. The United States benefits from its geographic advantage and product quality, as well as the DR’s preference for Certified Angus Beef in both food service and retail establishments. New domestic production of Brangus cattle may provide competition in the medium- to long-term.
Cheese: In 2017, the United States exported US$29 million in cheese and curds to the DR, which represented 41 percent of such imports. The dominant competitor is the EU (especially the Netherlands), with a 56 percent market share. Both U.S. and European suppliers benefit from product quality and meeting tourist expectation of familiar products. While all cheese imports face several policy-related barriers in the DR, the local market does not produce comparable products due to quality and sanitary factors and a limited number of cheese types.
Wine: The DR’s young wine market holds a lot of potential for the U.S. wine industry. In 2017, the United States exported US$11.7 million of wine to the DR, which represented 25 percent of Dominican wine imports. The dominant competitor is the European Union (especially Spain), which represented 71 percent of wine imports.
Potatoes: In 2017, the United States exported US$4.6 million in frozen potatoes, with almost total market share. For fresh and chilled potatoes, the U.S. exports were valued at US$3 million in 2017, representing a 65 percent market share. Competitors include Canada (23 percent) and the European Union (12 percent). However, there is a high level of protection to local producers. The best opportunities in this category are for U.S. baby and/or multi-colored potatoes that are not produced locally and are increasingly popular in the DR’s food service.
Apples: The United States exported $18.7 million in fresh apples to the DR, representing a 93 percent market share. United States’ quality and geographical position is a major advantage, with Chile entering the market counter-seasonally. Given the tropical climate, local production is not competitive, and the DR is dependent on imports.
SECTION IV. Best Product Prospects
Leading U.S. products for distribution in hotels and restaurants include premium red meat cuts, pork, poultry parts, seafood, cheeses, frozen potatoes and vegetables, fresh fruit, wine, and craft beer. U.S. beef (including special meat cuts) is growing in popularity at high-end restaurants, especially in Santo Domingo. While the DR has substantial domestic poultry and pork sectors, the growing food service sector creates additional demand for specific cuts. The DR’s food service sector is largely dependent on imported seafood products, which creates opportunities for U.S. lobster, salmon, and other seafood products in this price-sensitive market. Cheeses, whether served individually or as ingredients (especially cheddar, mozzarella, and provolone), are widely used in the food service sector. In addition, frozen potato products continue to be very popular. While fruits were previously available on a seasonal basis, pears, grapes, and several varieties of apples are now present throughout the year, which creates additional opportunities. There is now interest for other deciduous fruits, such as nectarines, peaches and apricots, to enter the market. U.S. wines, mainly from California, are gaining market share despite fierce competition from the European Union. There is also increasing demand for craft beer. U.S. turkey has high potential during peak holiday periods, especially from November to December. Duck can be found on occasion as a specialty product in some upscale restaurants, hotels, and resorts throughout the year.
SECTION V. Post Contact and Further Information
Foreign Agricultural Service (FAS/ USDA)* United States Embassy in the Dominican Republic Ave. República de Colombia # 57, Santo Domingo, Dominican Republic Telephone: 809-368-7654; 7770 E-mail: [email protected] Web page: www.fas.usda.gov
*Please do not hesitate to contact this office for more detailed information about the Dominican food service sector, major players, and any other related questions.
ASONAHORES (National Hotel & Restaurant Association) C/Presidente González esq. Av. Tiradentes 8vo. piso, Edif. La Cumbre, Naco Santo Domingo, Dominican Republic Telephone: 809-368-4676 Contact: Ms. Sheyly Viuque, Marketing Director E-mail: [email protected] Web site: www.asonahores.com
CDCT (Dominican Consortium for Touristic Competitively) C/ Porfirio Herrera # 23, Piazza Dei Fiori, Ens. Piantini Santo Domingo, Dominican Republic Telephone: 809-872-0001 E-mail: [email protected]
World Travel and Tourism Council Economic Impact 2018 for The Dominican Republic Contact: Mr. Rochelle Turner, Research Director E-mail: [email protected] Web site: www.wttc.org